Wheat Heads for Biggest Weekly Drop in 2 Years as Supply Eases; Rice Falls

Wheat headed for the biggest weekly drop in more than two years in Chicago after the U.S. unexpectedly raised its global supply estimate. Rice and corn also declined on forecasts for bigger supplies.

Global wheat inventories will total 181.9 million metric tons at the end of the marketing year on May 31, up 2.3 percent from last month’s estimate, the U.S. Department of Agriculture saidyesterday. Analysts surveyed by Bloomberg News had forecast stockpiles would decline to 177.56 million tons. Corn and rice inventory estimates also climbed.

“The USDA pointed to inventory stabilization, with small inventory builds for most crops,” Goldman Sachs Group Inc. analyst Damien Courvalin said in a report. “We believe that this stabilization will put a lid on crop prices in the short term. With the market focus shifting to the likely 2011-2012 supply response, we actually see downside risk to crop prices in the near term.”

Wheat for May delivery slid 14 cents, or 1.9 percent, to $7.265 a bushel at 10:06 a.m. London time on the Chicago Board of Trade. The grain is down 13 percent this week, on course for the biggest decline since December 2008.

The agency’s announcement “was bearish for wheat prices,” Luke Mathews, a strategist at Commonwealth Bank of Australia, said in an e-mailed report today. “Continued Middle East and North Africa violence and the stronger dollar compounded losses in the wheat pit.”

Milling wheat for May delivery lost 2.8 percent to 220 euros ($303.29) a ton on NYSE Liffe in Paris, retreating for a 10th day in a row.

Momentum Shifts

Libyan national leader Muammar Qaddafi’s son Saif al-Islam Qaddafi said government forces are mounting a full-scale attack on rebels. The momentum has shifted to Qaddafi’s forces, two top U.S. intelligence officials said.

Unrest in the Middle East may prompt speculators to exit the grain market as they move to less risky assets, sustaining losses in prices, Michael Pitts, a commodity sales director at National Australia Bank Ltd., said by phone from Sydney today.

Rice for May delivery declined 42.5 cents, or 3.3 percent, to $12.625 per 100 pounds in Chicago after reaching $12.55, the lowest price since October. The grain has declined 11 percent this week, the most since May 2008.

Global rice stockpiles may rise to an eight-year high of 98.8 million tons, according to the USDA’s estimate yesterday. The department raised its inventory estimate from 93.854 million tons in January.

Rice Demand

The USDA cut its outlook for the global harvest to 451.5 million tons and pared its estimate on demand, while raising a forecast on stockpiles in China and India, the world’s two largest growers. That would put the global supply balance in surplus, compared with a forecast deficit last month.

Corn for May delivery fell 9.75 cents, or 1.4 percent, to $6.73 a bushel, on course for a 7.6 percent slide this week, the biggest since November.

The USDA raised its global corn inventory estimate to 123.1 million tons, from 122.5 million tons last month, on bigger harvests in Brazil.

Concern that supplies would tighten amid rising demand helped fuel a rally in crop prices as corn, wheat and rice jumped this year to the highest levels since 2008. The gains boosted global food costs to a record last month after a 25 percent jump last year, according to the United Nations.

May-delivery soybeans declined 16.5 cents, or 1.2 percent, to $13.39 a bushel, set for a 5.3 percent drop this week. That would be the biggest weekly decline since November for the oilseed.

(Source: http://www.bloomberg.com/news/2011-03-11/wheat-heads-for-biggest-weekly-loss-in-2-years-as-supply-eases-rice-falls.html)